By: Kelly M. Lewis, CFP®, JD, LLM
“They don’t need any more money; they do just fine on their own.” This is an answer I occasionally hear in my job when beginning the estate planning and wealth transfer discussion. What does it mean? When I ask clients what their goals are for their money when they die, there are two general avenues of thought: (1) leave as much to their family as possible, or (2) spend it. In this blog, we are going to discuss the “spend it” line of thinking.
Everyone has a different relationship with money; quite often, this relationship is developed early in life and can be a driving factor in future financial decisions. It is important for some to save and transfer as much money as possible to next generations. For others, spending the money they worked so hard for is just as, if not more, important. There is nothing wrong with that.
How should you go about planning to spend most or all of your money in your lifetime?
- Budget – if you plan for 30-40 years of retirement and do not want to leave a penny behind, then creating, maintaining, and closely following a budget is imperative to success. It is quite common for new retirees to spend large amounts of money in the early retirement phases, which can have a large negative impact on long-term budgeting. The monitoring stage is important because a budget needs review and adjustments annually.
- Planning – What are your main goals for your money? Do you want to travel the world? Do you want to gift to your kids or charities so you can see the impact you make while living? Do you want a luxurious beach home to spend winters in? Do you want to set money aside for potential future medical or long-term care costs? There are many different ways to spend money, and over a decades-long retirement, these priorities may shift. Having a discussion with your Advisor and setting up hypothetical goals is important for understanding how and when you will spend your wealth.
- Sharing – This last step is flexible. Everyone is different in how much they want to share with family and friends about their wealth or the transfer of it upon their death. Is it necessary to tell your children or other family members that you are leaving them nothing? No. It is up to you. I have seen parents that are extremely open about it and others that do not share anything with their family. I will say this. If you believe your family is depending on or expecting some money from you, it may be in your interest and theirs to share with them what your plans are.
There is nothing wrong with wanting to spend the money you have earned in your lifetime. It may be more common than you think. Start with deciding if this is what you want. If you want to spend it, I say go for it! You can’t take it with you.